At first Debi Allbutt was told her husband had died in an accident. Defence officials explained how he had been killed during the heat of battle, with a desert storm compounding the chaos during nocturnal manoeuvres outside the southern Iraqi city of Basra.

Debi Allbutt accepted their version of the "friendly fire" tragedy in which Corporal Stephen Allbutt's tank was fired on by another Challenger II on 25 March 2003, days into the invasion of Iraq. But questions soon began to surface. Stephen's friends returned from the conflict and the story changed. "They came to see me. They told me what had happened. I was angry, shocked," Allbutt said. Her husband's colleagues described being given inadequate equipment or lacking it, of not receiving night-time recognition training, and how firing boundaries were altered without telling troops.

The near decade-long fight for compensation over Stephen Allbutt's death will reach its next stage when the court of appeal deliberates on a case that threatens to change the way in which the British military prepares and equips its troops for war. As well as redefining the rights of soldiers and their families to seek redress, the case examines the state's duty of care towards those it sends to fight.

Debi Allbutt, who lives in Stoke-on-Trent with the couple's sons, Josh, 23, and Connor, 17, said: "It's been a real struggle. It's been fight after fight with the MoD for years and years. It shouldn't have to be like this. How can they just keep getting away with this? They should have just held their hands up, accepted that they have a duty of care. Eventually we found the truth; now we are fighting for justice."

However, the 46-year-old is nervous, given the MoD's anxiety to avoid a judgment that could pave the way for the military to be sued for failing properly to train and equip soldiers fighting in war zones. So far, lawyers claim, the MoD has opted to pay families using out-of-court settlements. They also believe the case could lead to dozens more claims from servicemen's families blaming their deaths on inadequate or missing equipment.

The timing is also significant, coming against a backdrop of cuts. "It's a milestone case and I am quite worried. If we win, things will change. This cannot happen again," said Allbutt, who works as a complementary therapist.

Court documents reveal that the MoD will argue that the procurement and allocation of resources during war is a matter of judgment and one courts cannot decide. They state that "the executive and parliament are the appropriate decision-making bodies" regarding questions of the allocation of resources and policy choices.

Shubhaa Srinivasan, of law firm Leigh Day & Co, which is representing Allbutt, said: "It cannot be right to argue it is not appropriate for a court to scrutinise the MoD's decisions on allocating resources for training and the provision of equipment. It is essential in a democracy that an independent judiciary can challenge these decisions whether resources are scarce or not.

"The MoD argues that, if a duty of care is imposed in circumstances of the claims brought by my clients, it would inhibit decisions on the battlefield or undermine military discipline. This argument seems to defy logic. What would it do for military morale if soldiers were to learn that the army has no duty at all to them to reduce the risks that they may die or sustain injury on the battlefield?"

Even if victorious, Allbutt says her treatment by the MoD will always rankle. The official account of her 35-year-old husband's death meant that in the following weeks she sent a card of condolence to the crew of the firing tank, explaining that she forgave them and "would stand by them". Later she learned that the card had been photocopied by commanders and distributed among his friends. "Initially they thought I was loopy, but they didn't realise what I had been told," she said. "They made me feel like a mug."

Once she began investigating her husband's death, Allbutt wrote repeatedly to the MoD, receiving a dribble of documents, most of which were so heavily redacted that they seemed to her "near nonsensical".

Corporal Stephen Allbutt, who died in Iraq in 2003. His inquest heard tanks were poorly equipped. Photograph: MoD/PA

Slowly, uncomfortable truths began to emerge, corroborated by evidence heard during Stephen Allbutt's 2007 inquest. Not only did tank crews lack fixed GPS systems and other devices such as a "blue force tracker" to help pinpoint other allied positions, but crews were given differently scaled maps, some of which omitted key terrain features, making it hard to locate other allied positions. When killed, Allbutt was wearing his "greens" instead of desert fatigues and had had to buy boots that wouldn't melt.

His death, the coroner concluded, was "completely avoidable". During the friendly fire incident Trooper David Clarke, 19, from Stafford, was also killed. Two others were injured – Queen's Royal Lancers Daniel Twiddy and Andy Julien. They were later medically discharged from the army and are co-claimants in the case.

The court of appeal will also have to rule on the MoD's argument of "combat immunity", which means that civil claims involving injury or death of service personnel have no merit "because the damage was incurred in the course of hostilities".

Judges will also hear the case of three soldiers killed in Iraq in 2005, when their Snatch Land Rover was hit by hidden bombs. Private Phillip Hewitt, 21, of Tamworth, Staffordshire, Pte Lee Ellis, 23, of Wythenshawe, Greater Manchester, and Lance Corporal Kirk Redpath, 22, of Romford, Essex, were killed in separate incidents after their Snatch Land Rovers were hit by roadside bombs.

Lawyers for the families, who are also seeking compensation, argue that the vehicles were completely unsuited for Iraq and that the ministry had an obligation to take reasonable steps to provide troops with proper protection. At least 37 UK servicemen and women in Iraq and Afghanistan were killed in the lightly armoured Land Rovers, dubbed "mobile coffins" by some soldiers.

An MoD spokesman said all personnel injured in service receive a tax-free lump sum and the seriously injured also receive a monthly payment for life, but claims made on behalf of those injured or killed on operations could be subject to a combat immunity defence. He could not comment on an ongoing legal case.